UK television group Channel 4 recorded its first loss for 10 years in 2001, but has forecast a return to profits in 2002.

Despite seeing its share of total terrestrial TV advertising revenue rise to 23.5% last year, from 22% in 2000, the group made a loss of �20.6m.

Channel 4 put the loss down to a downturn in advertising across all the networks.

Launched in 1982, it promised it would be the most innovative channel on British television, realised by recent programmes such as the controversial Brass Eye spoof paedophile documentary.

Afternoon quiz show Countdown and Brookside are the longest-running shows on the network, but the flagship soap has been suffering falling ratings for several years.

Both series of reality TV show Big Brother have proved a ratings and commercial success, with viewing figures topping seven million for its live final.

Upturn predicted

But Channel 4 has been accused of straying from its innovative premise by buying up mainstream US TV shows such as Friends, Frasier and Ally McBeal.

This is the first time the group has made a loss since the last downturn in the advertising market in 1992.

But Channel 4 said it would see a 4% increase in advertising revenue in April, compared to the same time last year.

And it is predicting an increase of 8% for May and June.

Chief Executive Mark Thompson said: "We are cautiously optimistic about our prospects for 2002 on the strength of an encouraging second quarter.

"It is still too early to be predicting a full advertising recovery but Channel 4, at least, is moving in the right direction."

Difficult conditions

Group turnover rose by 2% to its highest ever level of �731m.

Mr Thompson said: "Channel 4 performed better than its main rivals in 2001 in the most difficult market conditions for a decade.

"But we could not escape the effects of reduced spending on TV advertising, which pushed us into the red.

"We would obviously have preferred to be in profit, but we should keep this loss in perspective considering the performance of other companies across the media sector."

Channel 4 took the decision to end the Big Breakfast last year after a fall in ratings and has just replaced it with a new morning news show called Rise.

Promising news for Channel 4 was the announcement of an �9.5m deal for Nescafe to sponsor Hollyoaks, a soap aimed at a younger market than Brookside.